Are your tax withholdings accurate?

Are your tax withholdings accurate?
11
Jun

If your 2018 tax return was a doozy, you may want to consider making some changes to your tax withholdings—after all, changes are in the air at the IRS.

One of the most common reasons that many taxpayers had smaller refunds (or unexpectedly owed tax) for 2018 were errors in the IRS’ withholding tables. In general, the IRS decreased withholding too much in response to changes in the Tax Cuts and Jobs Act. Where you as an individual taxpayer fall on the withholding tables is dictated by information on the W4 form that you completed when you started your job and may not have thought about since.

Now, the IRS has a new W4 form in the works, the goal of which is to increase the accuracy of everyone’s withholding. The new form will require far more detailed information than the W4 we’re accustomed to completing. Currently, you can view a draft of the form on the IRS website, and the IRS currently has an open call for feedback on the draft. You may submit your comments to WI.W4.Comments@IRS.gov by July 1, 2019.

The new form is slated to go into effect for tax year 2020. For tax year 2019, we strongly recommend that every taxpayer review your withholdings and ensure you won’t be surprised when you file your 2019 return. With half the year still ahead of us, you have time to adjust your withholdings if you expect a shortfall (or an overage).

he IRS has a paycheck checkup calculator that you can use to help determine whether your withholdings are sufficient—or if you’re having too much tax withheld. The average 2018 refund was about $2,800. If you received a significant refund and expect a similar tax situation in 2019, you may have an opportunity to increase your take-home pay by decreasing your withholdings. You need your most recent paystub and a copy of your 2018 tax return on hand in order to enter the most accurate numbers into the calculator.

To the average taxpayer, the proposed draft of the new W4 form may appear daunting. However, by pulling your last paystub (and your spouse’s if you file jointly) and entering accurate information into the calculator, you will get clear answers for your W4. The paycheck checkup calculator is a great tool that’s easy to use.

By the way, if you do change your withholdings for tax year 2019, be sure to go back and review again at the beginning of 2020. Your mid-year change may lead to a different result when it applies across an entire year in 2020. And remember—we’re here to help. Consulting a tax expert can go a long way toward more accurate withholding and a lighter filing burden at tax time.